City Expects Refinancing Will Save $4.2 Million : Thousand Oaks: The deal involves certificates of participation, similar to bonds, issued in 1988.

Much like homeowners refinancing a mortgage, Thousand Oaks officials will take advantage of lower interest rates to save about $4.2 million in city funds over the next quarter century.

The refinancing will not yield a sudden windfall for Thousand Oaks. Rather, the city will save roughly $180,000 a year--about the cost of the DARE drug education program.

The savings will come from a complicated refinancing transaction that the City Council approved in a unanimous vote Tuesday.

The transaction hinges on certificates of participation issued in 1988 to pay for construction of the teen and senior centers, the Newbury Park branch library and Conejo Creek Park.

Certificates of participation function almost exactly as bonds do: investors put up cash to buy them and thereby inject money into city coffers.

Flush with cash, the city can then carry out major projects. Investors reap interest for years or decades, and then receive their principle in a lump-sum payment when the certificates mature.

Because the 1988 certificates carry an interest rate of nearly 7.9%, Thousand Oaks Finance Director Robert Biery said the city could save money by issuing new, lower-interest certificates.

Under the program approved by the council, the city will redeem the old certificates now, paying back investors’ principle years before the due dates. To finance that move, the city will sell new certificates, with an interest rate of about 5.9%.

The whole transaction, including attorney fees and insurance requirements, will cost about $102,000, said Paul Farr, the city’s redevelopment associate. But officials figure the expenditure will pay off later, as interest rates are expected to rise in decades to come.

“The way I read it is, we get a better deal and we save some money,” Councilwoman Judy Lazar said.

The new certificates will be sold in $5,000 blocks during a competitive auction April 26. The city will then swiftly repay investors holding 1988 certificates.

“I don’t know where they get the takers for these certificates, but our advisers should know what the market is,” Mayor Elois Zeanah said. “I have to simply take this on the wisdom of our staff.”

Confident that the city will receive a solid bond rating, Farr said he anticipates no problem selling the certificates. By law, investors do not pay state or federal income taxes on the interest, so certificates can be attractive long-term investments.

“The people who buy these want tax-free money and an A-rated city to back it up,” Councilman Frank Schillo said before Tuesday night’s meeting. “We continue to be a good, fiscally sound city--we’ve never defaulted on anything, and we’re in the black.”

The new certificates of participation, like those issued in 1988, will total nearly $16 million. That’s enough money to pay for the senior and youth centers, the branch library and the park--and then some.

Finance director Biery told the council that the leftover funds amount to about $1.5 million. That sum would have been available if the city maintained the 1988 certificates, and will still be free under this year’s refinancing program.

The council may use the $1.5-million reserve pot to help pay for repairs at the earthquake-battered Thousand Oaks Library, officials said. A collapsed ceiling and burst water pipe caused about $2 million worth of damage during the January Northridge earthquake.

The library is scheduled to reopen next week, but officials have still not determined how much money the city will put up and how much will be covered by insurance or federal relief payments.